Why does an LEI need to be renewed?
The Global LEI System (GLEIS) was established in 2011 to make sure that we do not experience another financial crisis like the one in 2008. The new system is more transparent and, as part of it, each business has a Legal Entity Identifier (LEI) code which helps to identify market participants on a global scale.
This LEI database, consisting of all LEI records is a free tool that can be accessed by anyone. The LEI record containspublic information such as name, address, where the organization is registered, helping to assure consumers that the entity that they are dealing with is legitamate.
They Must Update Registration
Each year, businesses are required to renew their LEI registration. This is required to ensure that information is of the highest standard and reliability. All renewal information is then inputted into the database to ensure that the updated information is accessible.
Businesses are required to renew their LEI code exactly one year after their initial registration and continue to do so at the same time in each successive year.
What Happens If They Do Not need Registration?
There are rigorous standards related to renewals. GLEIS takes registration and renewals quite seriously. Companies that fail to update and renew registration will default to inactive status, and their LEI will appear as “Lapsed.”
This may not seem like a big deal to some, but consider that the vast majority of organizations conduct business globally. Failure to register or renew your LEI can deny you access to the global market and therefore hamper your ability to do business.
This may seem like a strict punishment for failure to renewal, but the goal is to protect the financial systems from a catastrophic event. Thus, businesses are expected to meet the standards set by the Global Legal Entity Identifier Foundation (GLEIF).
Allowing You to Register for Multiyear Periods
One of the things that the registration agents did to help businesses was to allow for multiyear renewals. There are many organizations out there that are not planning on changing locations or altering anything about their business. Therefore, it becomes tedious to continuously renew every year.
In response, a three- or fiver-year registration period was created. This helps to avoid any lapses while also ensuring that information is constantly maintained. Of course, if a business does change any of their information during the multiyear period, they are expected to update this as quickly as possible.